A Hollywood tax lawyer who is a potential key witness in what Internal Revenue Service officials have called a "staggering" cheat of the tax system has pleaded guilty to a single count of tax evasion — involving nearly $36 million in undeclared income — and agreed to cooperate with the prosecution of two co-defendants.
A Hollywood tax lawyer who is a potential key witness in what Internal Revenue Service officials have called a “staggering” cheat of the tax system has pleaded guilty to a single count of tax evasion — involving nearly $36 million in undeclared income — and agreed to cooperate with the prosecution of two co-defendants.
Matthew Krane appeared Thursday before U.S. District Judge Ricardo Martinez in Seattle and entered the pleas to tax evasion as well as falsely attempting to obtain a passport. As part of the deal, Krane has agreed to cooperate with federal prosecutors in exchange for a sentence of no more than five years in prison for the convictions.
Krane has pleaded guilty to failing to pay taxes for 2002, which is the year prosecutors allege he hid $35.9 million in overseas accounts.
That money, according to an indictment unsealed last summer, was allegedly given to Krane as a kickback by two former officials of the Seattle investment firm Quellos Group for allegedly steering one of his wealthy Hollywood clients to Quellos.
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Krane has agreed to cooperate with the federal prosecutors in the case against former Quellos CEO Jeffrey Greenstein and his business partner, Charles Wilk, according to court filings.
Another Los Angeles tax lawyer, Robert Jason, pleaded guilty to filing a false tax return in connection with the case.
Prosecutors say Greenstein and Wilk were the architects of an investment plan called POINT first offered by Quellos in 1999.
Over the next three years, six investors — including Krane’s client, identified in records as Haim Saban, the producer of the popular “Mighty Morphin Power Rangers ” cartoons — were “misled” and poured a total of $1.6 billion into POINT, prosecutors allege. They later had to pay the government nearly $400 million in back taxes and penalties.
Another investor in POINT was identified in congressional documents as Robert Wood Johnson IV, an heir to the Johnson & Johnson fortune.
POINT was scrutinized by Senate investigators looking at wealthy tax evaders and was found, according to a 2006 report, to be based on “billions of dollars worth of fake securities transactions that were used to generate” billions in capitol losses, which POINT clients could then use to offset taxes that should have been paid on legitimate capital gains.
Krane had maintained that the money he was paid was a fee for his services.
None of the investors were criminally charged, and the IRS has declined to confirm their identities.
The government is continuing to move to seize $293,000 in cash found during a search of Krane’s West Hollywood home in 2008. He also pleaded guilty to attempting to falsely obtain a passport that same year, when he knew he was under investigation.
Greenstein and Wilk have denied wrongdoing and said that the POINT plan was reviewed and signed off on by some of the biggest accounting firms and tax experts in the world.
Mike Carter: 206-464-3706 or firstname.lastname@example.org